“Asian banks cut exposure to U.S. dollar,” says a Financial Times headline. The FT refers to the Bank of International Settlements, which reports that India has lightened up on the dollar over the last three years. Dollar reserves in India fell from 68% at the beginning of 2002, to only 43% today. In China, the dollar portion of foreign reserves fell from 83% three years ago, to 68% today.
Chris Mayer, editor of Fleet Street, keeping watch over the busy intersection of financial markets:
“So when will the Fed stop raising rates? Sifting through pages of Fedspeak and Greenspanese is not likely to give you an answer. But here is an interesting supposition by the chief investment officer of FX Concepts, John Taylor. He writes that the Fed will raise rates “until there is a financial accident, one that is scary enough that the Fed starts loosening them again.”
“And when and where will that financial accident be? Ah, that is the question. Will it be in Fannie Mae? Or the banking sector? Or some crisis among over-indulged U.S. consumers? More likely it will surprise us and involve some obscure names that no one knows today, but will be on everyone’s lips tomorrow.”
Lenders may be reckless, but your fellow co-op owners are growing cautious. A friend sends this note from the Big Apple:
“In New York, you no longer look like a good risk if you’re only hauling in a $1 million or so a year. I guess since the banks won’t apply standards to loans, somebody has to. And what strict standards they are.
“To get a New York apartment these days, some buildings are asking for three years of mortgage payments and maintenance fees (typically in the range of $500-$1000 a month on top of the mortgage) before the board will approve an apartment purchase.
“In some places, they even want three times the cash value of the apartment sitting in an escrow account, as a buffer against God knows what. Maybe they know something more wicked than we imagine this way comes.”
“Dad, I just don’t know,” said Maria yesterday. “I don’t feel like it’s the real thing. But I want it to be the real thing. So, I don’t want to tell him that it’s not the real thing. But I can’t tell him something that isn’t true. And I can’t pretend it’s the real thing when it doesn’t quite feel like the real thing. Do you know what I mean?”
“Maria,” Dad replied. He gives advice on many subjects, all of it at least as good as his financial advice. “You’re too young to have a boyfriend. You’re only 19. Wait another 10 years or so…”
“Oh, Dad…this isn’t funny. I don’t know what to do. And I feel like I have to do something. I mean, he’s really great. He’s Greek, you know. And he looks like a Greek god. I’m not kidding. But he might be a bit of a nut. I’m not sure. But you like people who are a bit nutty. They fit right in with the rest of the family. And he’s really wild about me. And his mother is town. And I’m going to meet her, tomorrow, probably.”
“Just calm down. You don’t have to do anything. If it doesn’t feel like the real thing, then it’s definitely not the real thing. That doesn’t mean it won’t become the real thing. But just take your time. Relax. There’s no hurry. If it becomes the real thing, well, great. But if it doesn’t that’s great too. Just don’t put yourself in a position where you have to pretend…or have to try to make yourself feel something you don’t really feel. The worst thing you could is to lead him…and yourself on…then, it would be a real mess.
“Above all, try to maintain your dignity. You might need it. And when do I get to meet him? I’d like to give him a warning…”
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.